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Voxeljet: Newly Public 3-D Printing Company Is the Real Deal

On Friday, voxeljet became the newest and smallest 3-D printing company to hit the market.

Despite all the media hype surrounding 3-D printing -- the technology allowing successive layers of material to be printed out on top of each other to create three-dimensional products -- there are surprisingly few ways for investors to enter the 3-D printing space. While a few major companies like GE are engaged in the 3-D printing industry, for most of the last decade there have been only two publicly traded companies focused solely on 3-D printing: 3D Systems(NYSE:DDD) and Stratasys(NASDAQ:SSYS). Both companies have seen phenomenal stock runs over the past few years, and perhaps that has inspired the recent bout of initial public offerings from smaller 3-D printers. On Friday, voxeljet(NYSE:VJET) became the newest 3-D printer maker on American public exchanges, with its initial public offering raising $84.5 million in capital for a company now valued at about $552 million as of market close Monday. So what's this new 3-D printing company all about, and is it right for your portfolio?

About the businessVoxeljet's initial public offering follows the IPO of fellow 3-D printer ExOne(NASDAQ:XONE) in February, which has since gained nearly 100%. Voxeljet shares a lot in common with ExOne. Bigger, older peers 3D Systems and Stratasys have historically been focused primarily on the consumer market (though that may be changing), producing a range of of relatively low-cost printers that could be bought and used by individuals or small businesses. ExOne and voxeljet are both aimed more at industrial and commercial users in fields like automotive, aerospace and defense, and engineering, utilizing a smaller number of heavier-duty printers to create components that would be more at home in a factory than on a desk.

Voxeljet doesn't sell many printers, having an installed base of just 52 printers worldwide including test printers, compared to tens of thousands of units shipped by both 3D Systems and Stratasys. Instead, voxeljet sets itself apart with the size and speed of its printer, making the company's on-demand print services more attractive for heavy-duty uses. The company's largest printer has a maximum build size of more than three feet by six-and-a-half feet by 13 feet, a volume voxeljet claims is more than six times greater than the next-largest competitor. This allows voxeljet a significant advantage in output speed compared to its peers, which helps the company position itself toward industrial and big commercial clients with more intensive needs than a consumer-facing business.

voxeljet custom-printed 3-D model Aston Martin for use in the Bond film "Skyfall". Photo courtesy of voxeljet.

With any company doing business in an emerging field, technological superiority is an important marker of success. I would be loathe to invest in any 3-D printing company that didn't have its own intellectual property portfolio, but as of July 2013, voxeljet had over 130 patents or patents pending, including 20 patents issued and 13 patents pending in the U.S.

Many of its patents relate to printing with sand, a technique that allows voxeljet to create unique and customized molds with which to cast new metallic products. This technique has become popular with industrial designers looking to create rapid prototypes and equipment operators with unique component needs. Voxeljet developed this technique, and actually licensed patents related to printing with sand to competitor ExOne, which now owns the exclusive rights to make and sell machines that utilize the technology. As long as voxeljet remains primarily a print service provider, this isn't a problem, but if the company is interested in selling its own machines it may regret this decision.

About the stockThere's no doubting that voxeljet stock looked a lot more attractive on Friday than it did on Monday. The company issued 6.5 million shares at $13 each on Friday, and by the end of the day the stock had already doubled. By Monday, the stock had reached a dizzying high of $39.75, more than triple its IPO price. While voxeljet executives may be kicking themselves for leaving money on the table by pricing initial shares so low, investors today might want to be wary.

By any measure, voxeljet stock is expensive. The company hasn't earned a profit so far in 2013 due to the production cost of creating a new printer, but based on 2012 earnings of $276,000, or $0.03 American depository share, voxeljet stock is selling for more than 1,000 times earnings as of Wednesday's $30 stock price. In comparison, 3D Systems' price to earnings ratio is 90. Voxeljet brought in $11.3 million in sales in 2012, and despite a growing backlog, the company is expected to repeat that performance in 2013 due to capacity constraints -- raising capital to buy new production facilities was indeed part of the company's goal in going public. Nonetheless, $11.3 million in sales at the stock's current price would give a price to sales ratio of nearly 50, more than double ExOne's price to sales ratio and nearly quadruple that of Stratasys and 3D Systems. To put that in perspective, the average price to sales ratio of the S&P 500 is 1.5, implying that the market currently expects voxeljet to grow 33 times faster than the broader economy, a tall order for any business.

Foolish bottom lineEven for the high-flying 3-D printing industry, voxeljet's valuations are in some truly rarefied air. It's good to be cautious of new IPOs from small companies in a highly publicized industry. Even in a high-growth industry, not every company will make it. Personally, I wouldn't put any money into voxeljet that I wasn't prepared to lose. That being said, while the company may have been inspired to go public based on the hype around 3-D printing, this is far from a dotcom-era start-up with no business prospects banking on the buzz. Voxeljet has real cash flow, real clients, and perhaps most importantly, real and very valuable intellectual property. 3-D printing is forecast to grow by 20%-30% annually over the next few years, and voxeljet sees an even bigger market than that in its metal casting business. An investment in voxeljet is not for the faint of heart, nor for those who can't afford a loss. But for those looking to spread their bets in a high-growth industry, voxeljet is the real deal.

Editor's note: A previous version of this article misstated the type and the amount of voxeljet's 2012 earnings per share. The Motley Fool regrets the error.

Fool contributor Daniel Ferry owns shares of 3D Systems and Stratasys. The Motley Fool recommends 3D Systems, ExOne, and Stratasys. The Motley Fool owns shares of 3D Systems, ExOne, and Stratasys and has the following options: short January 2014 $36 calls on 3D Systems and short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Author

Daniel Ferry is a logistics nerd with a transportation planning background who focuses on transportation and advanced manufacturing companies. When he's not writing about trains, planes, and such, he enjoys learning and thinking about the business behind his favorite things: music, media, and good food and drink.